Question 1

If some resources used in the production of a good are only available in limited quantities,then the long run market supply curve will be perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 2

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales.
 
-Refer to Table 14-14.What is Bob's total fixed cost?

Accepted Answer

A)   $0
B)   $3
C)   $5
D)   $9E) C) and D)
F) None of the above

Question 3

Table 14-11
Suppose that a firm in a competitive market faces the following prices and costs:
 
-Refer to Table 14-11.In order to maximize profits,the firm should stop producing after it makes the

Accepted Answer

A)   first unit.
B)   second unit.
C)   fourth unit.
D)   fifth unit.E) A) and C)
F) B) and C)

Question 4

A corporation has been steadily losing money on one of its product lines,plastic flamingo lawn ornaments.The firm produces plastic flamingos in a factory that cost $20 million to build 10 years ago.The firm is now considering an offer to buy that factory for $15 million.Which of the following statements about the decision to sell or not to sell is correct?

Accepted Answer

A)   The firm should turn down the purchase offer because the factory cost more than $15 million to build.
B)   The $20 million spent on the factory is a sunk cost; that cost should not affect the decision.
C)   The $20 million spent on the factory is an implicit cost, which should be included in the decision.
D)   The firm should sell the factory only if it can reduce its costs elsewhere by $5 million.E) B) and D)
F) B) and C)

Question 5

Which of these curves is the competitive firm's short-run supply curve?

Accepted Answer

A)   the average variable cost curve above marginal cost
B)   the average total cost curve above marginal cost
C)   the marginal cost curve above average variable cost
D)   the average fixed cost curveE) A) and B)
F) All of the above

Question 6

The marginal firm in a competitive market will earn zero economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 7

Table 14-2
The table represents a demand curve faced by a firm in a competitive market.
 
-Refer to Table 14-2.For a firm operating in a competitive market,the marginal revenue from selling the 3rd unit is

Accepted Answer

A)   $12.
B)   $4.
C)   $3.
D)   $1.25.E) A) and B)
F) A) and C)

Question 8

Figure 14-3
Suppose a firm operating in a competitive market has the following cost curves:
 
-Refer to Figure 14-3.If the market price is $10,what is the firm's short-run economic profit?

Accepted Answer

A)   $9
B)   $15
C)   $30
D)   $50E) All of the above
F) C) and D)

Question 9

Table 14-14
The following table presents cost and revenue information for Bob's bakery production and sales.
 
-Refer to Table 14-14.Suppose that due to a decrease in the market demand for bread the market price of bread drops to $2.75.At this new price,if Bob produces and sells the profit-maximizing quantity,how much profit will he earn?

Accepted Answer

A)   $0.25
B)   $1.25
C)   $2.25
D)   The firm will lose $6.25.E) A) and B)
F) A) and C)

Question 10

Because there are many buyers and sellers in a perfectly competitive market,no one seller can influence the market price.

Accepted Answer

A) True 
 B)False

Question 11

Suppose a competitive market is comprised of firms that face identical cost curves.The firms experience an increase in demand that results in positive profits for the firms.Which of the following events are then most likely to occur?
(i) New firms will enter the market.
(ii) In the short run,price will rise; in the long run,price will rise further.
(iii) In the long run,all firms will be producing at their efficient scale.

Accepted Answer

A)   (i)  and (ii)  only
B)   (i)  and (iii)  only
C)   (ii)  and (iii)  only
D)   (i) , (ii)  and (iii) E) C) and D)
F) All of the above

Question 12

Figure 14-13
Suppose a firm in a competitive industry has the following cost curves:
 
-Refer to Figure 14-13.If the price is P1 in the short run,what will happen in the long run?

Accepted Answer

A)   Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry.
B)   Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry.
C)   Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.
D)   Because the price is below the firm's average variable costs, the firms will shut down.E) B) and C)
F) All of the above

Question 13

Figure 14-1
Suppose that a firm in a competitive market has the following cost curves:
 
-Refer to Figure 14-1.The firm will earn a positive economic profit in the short run if the market price is

Accepted Answer

A)   above $6.30.
B)   less than $6.30 but more than $4.50.
C)   less than $4.50.
D)   exactly $6.30.E) A) and B)
F) None of the above

Question 14

In a competitive market,the actions of any single buyer or seller will

Accepted Answer

A)   discourage entry by competitors.
B)   influence the profits of other firms in the market.
C)   have a negligible impact on the market price.
D)   None of the above is correct.E) C) and D)
F) A) and D)

Question 15

Mrs.Smith operates a business in a competitive market.The current market price is $7.50.At her profit-maximizing level of production,the average variable cost is $8.00,and the average total cost is $8.25.Mrs.Smith should

Accepted Answer

A)   shut down her business in the short run but continue to operate in the long run.
B)   continue to operate in the short run but shut down in the long run.
C)   continue to operate in both the short run and long run.
D)   shut down in both the short run and long run.E) A) and B)
F) C) and D)

Question 16

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit,which is positive.Then,the price falls to $18,and the firm makes whatever adjustments are necessary to maximize its profit at the now-lower price.Once the firm has adjusted,its

Accepted Answer

A)   quantity of output is lower than it was previously.
B)   average total cost is lower than it was previously.
C)   marginal cost is higher than it was previously.
D)   All of the above are correct.E) All of the above
F) A) and C)

Question 17

For any given price,a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

Accepted Answer

A)   average total cost curve.
B)   average variable cost curve.
C)   marginal cost curve.
D)   marginal revenue curve.E) All of the above
F) None of the above

Question 18

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise,the firm will shut down.

Accepted Answer

A) True 
 B)False

Question 19

Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible

Accepted Answer

A)   marginal cost of production.
B)   fixed cost of production.
C)   total cost of production.
D)   average total cost of production.E) B) and C)
F) None of the above

Question 20

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales.If the firm increases its output to 200 units,the average revenue of the 200th unit will be

Accepted Answer

A)   less than $12.
B)   more than $12.
C)   $12.
D)   Any of the above may be correct depending on the price elasticity of demand for the product.E) A) and B)
F) C) and D)

Exam 14: Firms in Competitive Markets.

Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13.If the price is P1 in the short run,what will happen in the long run?

Correct Answer
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Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3.If the market price is $10,what is the firm's short-run economic profit?

Correct Answer
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Which of these curves is the competitive firm's short-run supply curve?

Correct Answer
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Because there are many buyers and sellers in a perfectly competitive market,no one seller can influence the market price.

Correct Answer
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If some resources used in the production of a good are only available in limited quantities,then the long run market supply curve will be perfectly elastic.

Correct Answer
verified

Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14.What is Bob's total fixed cost?

Correct Answer
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For any given price,a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

Correct Answer
verified

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1.The firm will earn a positive economic profit in the short run if the market price is

Correct Answer
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Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales.If the firm increases its output to 200 units,the average revenue of the 200th unit will be

Correct Answer
verified

Correct Answer
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The marginal firm in a competitive market will earn zero economic profit in the long run.

Correct Answer
verified

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11.In order to maximize profits,the firm should stop producing after it makes the

Correct Answer
verified

Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible

Correct Answer
verified

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise,the firm will shut down.

Correct Answer
verified

In a competitive market,the actions of any single buyer or seller will

Correct Answer
verified

Correct Answer
verified

Table 14-2 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-2.For a firm operating in a competitive market,the marginal revenue from selling the 3rd unit is

Correct Answer
verified

Mrs.Smith operates a business in a competitive market.The current market price is $7.50.At her profit-maximizing level of production,the average variable cost is $8.00,and the average total cost is $8.25.Mrs.Smith should

Correct Answer
verified

Correct Answer
verified

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit,which is positive.Then,the price falls to $18,and the firm makes whatever adjustments are necessary to maximize its profit at the now-lower price.Once the firm has adjusted,its

Correct Answer
verified

Exam 14: Firms in Competitive Markets.

Figure 14-13 Suppose a firm in a competitive industry has the following cost curves: -Refer to Figure 14-13.If the price is P1 in the short run,what will happen in the long run?

Correct AnswerverifiedShow Answer

Figure 14-3 Suppose a firm operating in a competitive market has the following cost curves: -Refer to Figure 14-3.If the market price is $10,what is the firm's short-run economic profit?

Correct AnswerverifiedShow Answer

Which of these curves is the competitive firm's short-run supply curve?

Correct AnswerverifiedShow Answer

Because there are many buyers and sellers in a perfectly competitive market,no one seller can influence the market price.

Correct AnswerverifiedShow Answer

If some resources used in the production of a good are only available in limited quantities,then the long run market supply curve will be perfectly elastic.

Correct AnswerverifiedShow Answer

Table 14-14 The following table presents cost and revenue information for Bob's bakery production and sales. -Refer to Table 14-14.What is Bob's total fixed cost?

Correct AnswerverifiedShow Answer

For any given price,a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

Correct AnswerverifiedShow Answer

Figure 14-1 Suppose that a firm in a competitive market has the following cost curves: -Refer to Figure 14-1.The firm will earn a positive economic profit in the short run if the market price is

Correct AnswerverifiedShow Answer

Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales.If the firm increases its output to 200 units,the average revenue of the 200th unit will be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The marginal firm in a competitive market will earn zero economic profit in the long run.

Correct AnswerverifiedShow Answer

Table 14-11 Suppose that a firm in a competitive market faces the following prices and costs: -Refer to Table 14-11.In order to maximize profits,the firm should stop producing after it makes the

Correct AnswerverifiedShow Answer

Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible

Correct AnswerverifiedShow Answer

A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise,the firm will shut down.

Correct AnswerverifiedShow Answer

In a competitive market,the actions of any single buyer or seller will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 14-2 The table represents a demand curve faced by a firm in a competitive market. -Refer to Table 14-2.For a firm operating in a competitive market,the marginal revenue from selling the 3rd unit is

Correct AnswerverifiedShow Answer

Mrs.Smith operates a business in a competitive market.The current market price is $7.50.At her profit-maximizing level of production,the average variable cost is $8.00,and the average total cost is $8.25.Mrs.Smith should

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A competitive firm has been selling its output for $20 per unit and has been maximizing its profit,which is positive.Then,the price falls to $18,and the firm makes whatever adjustments are necessary to maximize its profit at the now-lower price.Once the firm has adjusted,its

Correct AnswerverifiedShow Answer

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